Religious books carrying repugnant views are far from unique to one particular religion. Indeed, Policy Exchange makes the point that "adultery, apostasy and homosexuality, for instance, are deprecated by all the Abrahamic religions, and many others besides", but the others "do not respond to these spiritual challenges with either an implied or an explicit threat of violence". What the report tries to tell us is that the literature "discovered" by Policy Exchange is an actual cause of "violent extremism".

But the report tells us nothing about the likely influence of such material: there is no examination as to who reads the stuff and how they are affected, what other material is sold in the "offending" bookshops, and indeed what is the context of some of the "offending" passages and how it is interpreted by readers, and importantly whether similar material may be found in literature associated with other religions. (The Bible, too, is replete with implied and explicit threats of violence against non-conformists.)

In the end, the report delivers what it initially promises it would not: excerpts from books embodying the stupid irrational sentiments you can expect from an ultra-conservative and dogmatic religious perspective about women being inferior and religious segregation. The vast majority of the offending material (about 93%) is authored by Saudi state-sponsored writers who - from my experience - have negligible uptake in Britain. Then there are tracts from Mawdudi's various writings, which you may not agree with or even like, but the idea that these should be banned or that they are the source of some form of social isolationism is as abhorrent as it is absurd.

Deobandis, Wahhabis, Hizb-ut-Tahrir and other segregation-oriented Muslims don't touch Mawdudi. He advocates democracy and the idea that the hadith cannot define what is prohibited and lawful - only the Quran can. He was also against partition and wanted a multicultural India instead of religious segregation and supported a secular female candidate for president over a male one. But you'd never guess this from reading the decontextualised excerpts in the report.

Mawdudi's audience in Britain is largely middle-aged, western-educated, and the type you'd find organising interfaith meetings with the local parish. The Islamic Foundation in Leicester, which the report presents as having derived from Mawdudi's thinking, is widely and rightly acknowledged as a leader in promoting good community relations. There is a huge chasm between what the report wants us to believe the listed literature promotes and what exists on the ground.

Policy Exchange had already tried to portray British Muslims as being anti-British and atavistic in another report, Living Apart Together [pdf], launched earlier this year. One of its findings, that 37% of young British Muslims want Shariah law, is probably among the most frequently quoted "facts" about British Muslims today - usually to prove that Britain is under threat. But what exactly was meant by Shariah law? Was it about personal law concerning marriage, divorce and burials? In which case UK law already accommodates Shariah law, as it does personal law from Jewish and other faiths.

Academics and others criticised the report's political agenda, questionable methodology and the fact that its findings were at odds with academic research. Last year, the 1990 Trust carried out its own survey with a transparent methodology which showed that far from Muslims being the fifth column Policy Exchange would have us believe, their attitudes were actually as liberal and tolerant as those of the rest of us.

Indeed, real research reveals even more surprising findings about Britain's "illiberal" community. A study at Lancaster university last year revealed that Muslim students carried far more tolerant and liberal views than their co-religionists, with only 29% of white pupils in favour of different faith communities working together to create a better society, compared to 76% of Muslim ones. A Citizenship Survey showed Muslims felt a closer attachment to Britain than white people did, and an ICM poll published in August as part of the BBC Asian Network's Asian Nation season, found that Muslims felt more British than Hindus. A Gallup poll in April came to similar conclusions. An Ipsos-Mori poll last month told us Muslim Londoners had more liberal views than the average Londoner; 89% and 88% respectively believe in personal freedom so long as it does not infringe on the freedom of others.

The truth is that an individual's outlook is not determined by what they read in religious books and pamphlets but by the social and familial circles they live in. The recent breakdown of these traditional social structures means populations are looking for security elsewhere and becoming increasingly vulnerable to far-right political ideologies promising belonging, identity and a cause. Today over 40% of Britons would not like to live next door to a black or Asian family and the same percentage believe a Muslim cannot be a British citizen. Surely a liberal democratic government and opposition should be examining and addressing such worrying attitudes rather than stoking them - which is exactly what it is doing by endorsing the divisive political agenda of groups like Policy Exchange.

The Policy Exchange is ideologically neoconservative and such views are marked by virulent Islamophobia and equally aggressive pro-Zionism. While the author of the report, Denis MacEoin, makes no secret that he has "very negative feelings" about Islam, he is adamant that any deviation from Israel being portrayed as other than the height of liberalism is a form of anti-semitism. But again this leads to a remarkable inversion of reality. This year's report by the Association for Civil Rights in Israel records a 26% rise in the number of racist incidents against Arabs and twice as many Jews reporting a feeling of hate toward Arabs with 74% of Jewish youths believing Arabs to be "unclean".

I called Policy Exchange and asked if they would conduct similar investigations into extremists in other UK religious communities which were promoting war crimes overseas - just last month two London trade fairs, one organised by the Zionist Federation and the other by Finchley Synagogue, were selling occupied land in Palestine in violation of the Geneva Convention. Such actions are in breach of UK anti-terror laws and are hardly conducive to community cohesion. A Dr King from Policy Exchange responded that the thinktank would look into it but it would require funding. When I responded that I might be able to source funding, he made it clear that before the funding stage such research would have to be approved.

Despite its extreme views and intellectual dishonesty, Policy Exchange has the complete attention of the political establishment in terms of dealing with the Muslim community. A report commissioned by them from Martin Bright attacked the government's position on engagement with the Muslim Council of Britain (MCB) and promoted the Sufi Muslim Council (SMC) only days before the official launch of the SMC.

The latest Policy Exchange report found that only 25% of the institutions visited by its researchers had offending literature, all of these were Salafi-oriented or had links to the MCB and none of them were Sufi.

I visited the nearest Sufi mosque bookshops deemed by the report not to contain radical material. Not only did I find two of the alleged "offending" books being sold there but plenty of other books not on the list but expressing identical sentiments to those found by Policy Exchange to be "offending": homosexuality being a perversion and sin, corporal punishment for sex outside marriage, etc, and in the words of one "Sufi scholar", Muslims should "not let personal preferences interfere with their choice of friends and enemies" and are "unyielding towards the disbelievers and compassionate towards one another".

The report is fundamentally flawed. Policy Exchange seeks to name and shame institutions, not on the basis of evidence, but purely on the basis of their religious denomination or organisational affiliation. Further, there is a distinct difference between those institutions where receipts were genuine - these were largely apolitical, literalist and ultra-conservative Salafist or Deobandi ones - and those where the receipts have come under suspicion: instituions that were pragmatic and tolerant in their interpretation of Islam but according to the report were connected to the MCB. In my view, the evidence was cherry-picked to create a pre-determined conclusion designed to support an extreme ideology at odds with our national interests.

This is not just an issue of receipts, or politically incorrect books, it is about how a democratic government engages with its own citizens, majority or minority, who have an absolute right to expect and demand honesty, fairness and equality.